Covered Bonds

Westpac and ANZ have joined Commonwealth Bank of Australia and National Bank of Australia in the race to bring Australia’s first covered bond, following enactment of a new law. But whether they will all issue in euros seems doubtful. Westpac, for example, is believed to be leaning more towards US dollars for its first deal.

The French covered bond market looks vulnerable to a sell off following recent underperformance of the government bond market. Local issuers are still anticipating a spread tightening on the back of the second covered bond purchasing programme, but they may now be wondering if they should not have issued earlier when they had the chance.

The French covered bond market is starting to look vulnerable to a sell-off following the recent underperformance of the government bond market. Local issuers had been anticipating a spread tightening on the back of the second covered bond purchasing programme, but they may now be wondering if they should have issued earlier.

Public sector backed cédulas became the latest victim of sweeping rating cuts on Thursday as Moody’s took negative action on 10 programmes after cutting the Spanish sovereign on Monday. Though secondary spreads have held, there are regulatory implications to the downgrades, and the investor base could shrink as bonds fall below triple-A.

Commonwealth Bank of Australia is racing National Bank of Australia to bring the country’s first covered bond, following enactment of Australia’s new law.

Coventry Building Society made its euro denominated debut on Monday, pre-empting weak market conditions that prevented issuance for the rest of the week with a €650m three year deal. The UK issuer ensured that recent covered bond supply continues to be dominated by countries that will not benefit directly from the ECB purchase programme.

The official announcement on Thursday of a joint venture between Caisse des Dépôts and La Banque Postale, which have both taken stakes in Dexia Municipal Agency, is credit positive for the issuing entity’s Obligations Foncières and should help maintain their triple-A ratings, bankers said.

The official announcement on Thursday of a joint venture between Caisse des Depots and La Banque Postale, which have both taken stakes in Dexia Municipal Agency, is credit positive for the issuing entity’s Obligations Foncières and should help maintain their triple-A ratings, bankers said.

Though there has been a perceptible change in French covered bond flows in the last couple of days following a tightening in the spread to government bonds, market trading remains stable. Flows are broadly balanced, though there are slightly better sellers in core markets. DexMA is marginally better bid in the wake of Thursday morning’s announcement on Dexia’s restructuring and cédulas are unchanged after Moody’s downgrades.

Public sector backed Cédulas became the latest victim of sweeping rating cuts on Thursday as Moody’s took negative action on 10 programmes after cutting the Spanish sovereign on Monday. The cuts bring the total number of negative rating actions taken on covered bonds in the last six weeks to around 40, according to Deutsche Bank analysts.

Fitch said on Wednesday that the shrinking pool of highly-rated banks to provide swaps in structured finance and covered bond deals could put pressure on deals, and add concentration risk to the financial system.